Another New Jersey budget hearing and another stupid idea as state Treasurer Andrew Sidamon-Eristoff considers delaying the state’s pension contribution a week to balance the current budget (“Jersey may hold pension payment,” May 9). Of course, the $1.58 billion payment is far less than what is needed to cover the escalating liabilities, but in this fantasy fiscal world, where any number will do as long as it is small enough and you follow proper procedures, there are a few details to address.Will there be a one-week interest adjustment on the late payment, since the payment due June 30 was adjusted for interest from the July 1, 2012, valuation it was based on?
The current budget year may be balanced, but where does this payment fit into the 2014-15 budget, which already includes a $2.25 billion pension payment?

Senate President Stephen Sweeney threatened to “shut down government if Chris Christie reneges on pension payment,” yet he kept quiet as that payment was reduced by $94 million through actuarial gimmickry and now will be severely reduced, if not for 2013-14, then certainly for 2014-15.

John Bury, Kenilworth

It ends there. Of course I am grateful to get the issue of New Jersey’s dysfunctional pension/political system more attention but there is more to the story. The last line edited out by the Star Ledger:

At this point what should be shut is his mouth as he has become an enabler of Chrisitie’s delusion of fiscal competence.

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7 responses to this post.

A year or 2 ago he worked with hand-in-hand with Christie on some pension reforms (not really much, but more than anyone else would have done) recognizing that what’s good for PUBLIC Sector Unions (MORE, MORE, & MORE) is not good for his PRIVATE Sector Steelworkers Union … as no money left to fund construction projects (since it all has to go to pay for Public Sector pensions & benefits) means few construction jobs.

Now, with his sights on NJ’s governorship, his song has changed. Knowing that he needs the Public Sector Union vote to ramp up his chances, he’s now supporting that shoveling of NJ taxpayer’s money to support these overstuffed Public Sector pensions, just like all the other politicians …..

Perhaps one day someone will stand up to the Unions and say:

“We’ve got one heck of a problem with your PAST service accruals, and we’ll need to address that, but it’s clear that your pensions are unaffordable, so heretofore. FUTURE service accruals STOP. You’ll now be getting 3% into a 401k-style DC Plan and Social Security …. just like 95+% of the Taxpayers who are on the hook for YOUR pensions”

Moody’s current methodology uses the following formula to adjust the PV of Plan Liabilities calculated at the (universally high) “official” Plan discount rate (typically around 7.5%) to a more reasonable level (around 5.5%)

[ PV x ( 1 + official %i ) ^ 13 ] / ( 1 + adjusted %i ) ^ 13 = Adj PV

If we assumed we have $87 in assets and $100 in PV of “Official” Plan liabilities, giving the “Official” Plan funding ratio of $87/$100=87% that you noted, and we recalculate the PV of Plan liabilities using Moody’s formula (and going from 7.5%* to 5.5%), we have:

It’s when you lie or delude yourself (like saying that the Plans are well funded when they’re really near the edge of the cliff), that you set the stage that needs great time to fix …. if fixable at all.

According to census figures total employment in Union County is at 202,372. According to New Jersey pension records 20,878 of those jobs are in government. Theoretically then 10% of the members of the Union County Democratic Committee should also be working in government to be representative of the general population. It’s not even close. When […]